It’s not just your car instalments that need to fit into your budget.
While we often have big plans when starting on the road to vehicle finance, the monthly payments are only part of the cost. You might end up needing to pick a car that’s cheaper than you think you can afford.
Over and above your monthly car instalments there are operating costs (like petrol, maintenance and insurance) that hike up the price of keeping your car on the road. And, of course, things like inflation and taxes affect your budget too. At the end of the day, your car costs a lot more than its advertised price – and this affects how much car you can actually afford.
While you’re car shopping, keep an estimate of your maximum monthly car payment in mind. Your total monthly car costs should not be more than 20% of your take-home pay. You should allow half of that for your other car costs such as petrol, insurance, maintenance and possible emergency expenses.
As an example, let’s say you earn a monthly salary of R10,000 after tax:
|20% of take-home salary||= R2,000|
|Half of that for other car costs
e.g. Petrol, insurance etc.
|Your maximum instalment||= R1,000|
Use an online calculator to work out the total car price you can afford, based on that monthly instalment amount. Then you’ll have a more accurate price range to look for.